London midday: Stocks flatten out as investors digest borrowing figures

(ShareCast News) - London stocks had flattened out by midday, giving up earlier small gains as investors digested the latest UK borrowing figures.
The FTSE 100 was flat at 7,272.46, while the pound was down 0.1% to 1.3485 against the dollar, which was easing off its recent one-year highs in the aftermath of the Federal Reserve's latest policy announcement.

On a largely quiet morning, there was a boost for the UK as public sector borrowing was lower than expected last month that should allow the Chancellor a little room for a fiscal boost in his forthcoming budget.

Public sector net borrowing excluding publicly owned banks stood at £5.67bn in August, the Office for National Statistics revealed, below the £6.9bn level from the same month last year and the consensus forecast for £6.4bn.

After August's low borrowing and July's small surplus, the cumulative total in the fiscal year has reached £28.3bn, down £0.2bn on the same months of 2016/17 and the lowest for this stage since 2007.

In its March forecast, the Office for Budget Responsibility forecast borrowing to rise by 13% this year.

Paul Hollingsworth at Capital Economics said the figures will come as welcome news to the Chancellor in the lead up to the Budget on 22 November and further increases the scope to ease back on austerity a touch.

Market participants were also mulling the latest policy announcement from the Federal Reserve, which stood pat on interest rates as expected on Wednesday, while Chair Janet Yellen confirmed the central bank will start winding down its $4.5trn balance sheet in October and hinted that one more rate increase is likely by the end of the year.

In corporate news, CRH rallied as it struck a deal to acquire Kansas-based Ash Grove Cement Company for $3.5bn, while speciality chemicals group Johnson Matthey surged after confirming its guidance for the year, sounding an upbeat note on the mid-term outlook for automotive catalysis and outlining new investment in the electric battery market.

Anglo American was also on the front foot on news that Indian billionaire Anil Agarwal plans to up his stake in the company to just over 20% from 13%.

IG Group was higher after saying it generated record revenues in the three months to the end of August, boosted by strong overseas growth for the online trading broker as UK client numbers tailed off.

Kier Group surged as it reported an 8% rise in underlying full-year pre-tax profit as revenue grew and its business remained relatively unaffected by Brexit.

On the downside, Capita tumbled after saying it grew underlying profits 46% in the first six months of the year but revenue dropped. Analysts at Morgan Stanley were not the only ones disappointed and finding the complicated results "difficult to read".

Catering group Compass was in the red after saying that chief executive Richard Cousins will step down from his role on 31 March 2018. He will be succeeded by current chief operating officer for Europe, Dominic Blakemore.

Mitchells & Butlers was on the back foot as it posted growth in sales for the year to date but said the latter part of the summer was hit by poorer weather, while Fresnillo was weaker despite saying that its headquarters and production facilities in Mexico were not affected by the earthquake there.

Taylor Wimpey, Crest Nicholson, Ladbrokes, Bovis and Redrow were all lower as their stock went ex-dividend.